Zillow (NASDAQ:Z) stock rose to a new high for the third straight day since rumors of the pending acquisition surfaced Thursday. Zillow will buy Trulia (NYSE:TRLA) in a stock swap originally valued at $3.5 billion.

The deal will combine two companies that are by far the leaders in their field.

A specialist works at the post that handles Trulia on the floor of the New York Stock Exchange on Monday. Trulia jumped more than 15% after the... View Enlarged Image

"The merger reflects the rapidly changing technology environment surrounding real estate, as well as the financial needs of these companies," Kevin Brown, president of the California Association of Realtors, said via email.

"We do have concerns, however, that this merger will lead to fewer choices and higher advertising costs for our members and their clients," Brown said.

The fears are legitimate, says Aaron Kessler, an analyst at Raymond James. He also says the merged company could be a stronger competitor for real estate broker sites.

"Brokers ... want traffic to go to their own websites as opposed to a third-party site," Kessler told IBD.

The Web companies, though, played down any such fears.

"We expect to be able to offer advertisers a better value proposition as one company," Zillow CEO Spencer Rascoff said during a conference call with analysts to discuss the deal.

Have Just 4% Market Share

Zillow and Trulia combined control less than a 4% share of the estimated $12 billion spent annually on real estate advertising, Rascoff said. Most of that advertising still goes to newspapers, billboards and direct mail, he says.

The two real estate websites generate revenue by charging advertisers — mostly real estate agents — to carry their listings and ads on the sites.

Under the terms, Trulia shareholders will receive 0.444 share of Zillow for each share of Trulia.

Based on Monday's closing price for Zillow, that values Trulia shares at 71.18. That's 75% above where Trulia closed on Wednesday, before that stock spiked 32% Thursday on reports of the possible buyout. Trulia also advanced 5% on Friday.

Trulia shareholders will own about a third of the company.

The companies say they have little overlap and will maintain both brands. Rascoff says comScore data show about half of Trulia's monthly desktop users in June did not visit Zillow, while about two-thirds of Zillow's customers did not visit Trulia.

Maintaining both brands within the same corporate parent will allow "us to better serve a larger audience, while taking advantage of certain shared back-end services," Rascoff said.

The companies expect the merger to cut costs by at least $100 million by 2016.

Trulia CEO Pete Flint will remain as CEO of Trulia and will report to Rascoff.

Zillow (NASDAQ:Z) stock rose to a new high for the third straight day since rumors of the pending acquisition surfaced Thursday. Zillow will buy Trulia (NYSE:TRLA) in a stock swap originally valued at $3.5 billion.

The deal will combine two companies that are by far the leaders in their field.

A specialist works at the post that handles Trulia on the floor of the New York Stock Exchange on Monday. Trulia jumped more than 15% after the... View Enlarged Image

"The merger reflects the rapidly changing technology environment surrounding real estate, as well as the financial needs of these companies," Kevin Brown, president of the California Association of Realtors, said via email.

"We do have concerns, however, that this merger will lead to fewer choices and higher advertising costs for our members and their clients," Brown said.

The fears are legitimate, says Aaron Kessler, an analyst at Raymond James. He also says the merged company could be a stronger competitor for real estate broker sites.

"Brokers ... want traffic to go to their own websites as opposed to a third-party site," Kessler told IBD.

The Web companies, though, played down any such fears.

"We expect to be able to offer advertisers a better value proposition as one company," Zillow CEO Spencer Rascoff said during a conference call with analysts to discuss the deal.

Have Just 4% Market Share

Zillow and Trulia combined control less than a 4% share of the estimated $12 billion spent annually on real estate advertising, Rascoff said. Most of that advertising still goes to newspapers, billboards and direct mail, he says.

The two real estate websites generate revenue by charging advertisers — mostly real estate agents — to carry their listings and ads on the sites.

Under the terms, Trulia shareholders will receive 0.444 share of Zillow for each share of Trulia.

Based on Monday's closing price for Zillow, that values Trulia shares at 71.18. That's 75% above where Trulia closed on Wednesday, before that stock spiked 32% Thursday on reports of the possible buyout. Trulia also advanced 5% on Friday.

Trulia shareholders will own about a third of the company.

The companies say they have little overlap and will maintain both brands. Rascoff says comScore data show about half of Trulia's monthly desktop users in June did not visit Zillow, while about two-thirds of Zillow's customers did not visit Trulia.

Maintaining both brands within the same corporate parent will allow "us to better serve a larger audience, while taking advantage of certain shared back-end services," Rascoff said.

The companies expect the merger to cut costs by at least $100 million by 2016.

Trulia CEO Pete Flint will remain as CEO of Trulia and will report to Rascoff.

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